FIRST

The Analysts call

Whats next for SingTel after the failed Myanmar telco bid?
OCBC - Carey Wong
We believe that there are still opportunities for SingTel to get involved at a later stage when the industry is more settled and the regulatory environment is more established. Market watchers estimate that the mobile market in Myanmar could be worth some US$2.6-3.0b in 2016. Separately, we see the recent volatility in the regional currencies as the biggest risk factor, as SingTel is especially exposed to AUD/SGD movements because of Optus. However, we do note that some value is starting to emerge around current levels, as SingTel has fallen back to below our SOTP fair value of S$3.83.

Why SingTels Myanmar bid loss is not so devastating

concerned about Bhartis recovery prospects and losses from SingTels digital business. While SingTel did initially suffer a minor pullback in its share price after the announcement of the results, OCBC analyst Carey Wong notes that it was probably due to the sharp run-up in share price just prior to the news. But overall, she adds that not winning it may not be a bad thing, given the massive scale The Myanmar market is esti- involved in the infrastructure mated to be worth US$2.8bn or just roll-out, where some market watchers believe that the capital 5% of SingTels total EV. investment could run into the tens of billions of dollars. winners fail to meet the regulators Ooredoo will reportedly invest post-selection requirements. US$15b over the 15-year period. We Though DBS analyst Tan Ai Teng note that the regulatory environment did not expect these candidates to is still very uncertain there, and win, both have experience and own that could probably put a cap on telcos in Asia. Telenor has businesses subscription rates, which could result in India, Pakistan, Thailand, in operating losses for the first few Malaysia and Bangladesh, while years. Qatar Telecomoperating under the Not getting the licence also means SingTels cash will be freed up for Ooredoo brandreportedly operates return to shareholders. CIMB in Indonesia, the Philippines, Laos, analyst Kelvin Goh estimates capex Singapore and Pakistan. of US$1bn-2bn for network rollout Tan notes that the Myanmar in Myanmar, 50-60% to be funded market is estimated to be worth by debt. All is not lost as we think US$2.8bn or just 5% of SingTels total EV. This is not surprising as Myanmars government-owned telco the country probably has one of the and incumbent carrier, Myanmar lowest mobile penetration rates in the Posts and Telecommunications, may seek a strategic shareholder to help it world (just 10%). Hence, a win may compete with the two new entrants, still not have a significant impact on predicts Goh. SingTels earnings. Rather, we remain ingTel may have been snubbed in the Myanmar telco licence awarding recently, but dont fret its not so devastating after all. SingTel, despite being widely touted as a front-runner, lost the highly-coveted 15-year telco licences to Qatar-based Ooredoo and Norway-based Telenor. Frances Orange is the back-up candidate should either of these two
18 SINGAPORE BUSINESS REVIEW | SEPTEMBER 2013

CIMB - Kelvin Goh

Cash that was originally planned for Myanmar will now be returned to SingTels shareholders. We estimate capex of US$1bn-2bn for network rollout in Myanmar, 50-60% to be funded by debt, in our estimation. SingTels net debt/EBITDA was 1.35x in FY3/13, below its target of 1.5-2x. We expect its dividend payouts to be at the upper end of its 60-75% band.

OSK DMG - Edison Chen

While SingTel and Yoma have lost the battle for Myanmars telco licences, NeraTel may score an indirect victory. This is because our checks show that both of the Myanmar licence winners Telenor and Ooredoo are NeraTels existing customers. NeraTel is currently providing services to them in Indonesia and Malaysia. According to the terms in the contract, effective from September 2013, both Telenor and Ooredoo have nine months to commence operations, and need to cover 75% of Myanmar with voice services and 50% with data services within the next five years. In order to maximise the 15-year licence benefits, Ooredoo has even outlined a more aggressive plan, spending US$15bn to reach 90% of Myanmars population within two years.